How to Do Business in Spain
If you’re thinking about doing business overseas, Spain is undoubtedly an area worth exploring. Here, we talk you through the advantages and disadvantages of doing business in Spain.
Business Culture in Spain
There is often a strong hierarchical structure within many companies in Spain, although this is changing as more young people return to the country following overseas education.
Friendship, loyalty and trust are often prioritised when building business relationships. An individual's character, humour and ability to get along with business partners is often valued more highly than their skills and achievements.
Benefits of Doing Business in Spain
Here are some of the main factors that contribute to ease of doing business in Spain:
Strong history of UK investment
The UK and Spain have a long and productive history of investment and trade. Spain is the UK’s 9th largest trading partner and in July the British Chamber of Commerce announced that the UK had been the country’s largest foreign investor in the first quarter of 2022.
Spanish people are generally positive and trusting of UK products and services, and high profile Spanish organisations such as Zara and Santander have multiple branches in the UK.
Member of the EU
The ease of doing business in Spain is enhanced by its longstanding membership of the European Union and participation in the eurozone.
If you choose to open a subsidiary or branch of your UK business in Spain your investment will benefit from the rich opportunities presented by having access to the EU single market and its 500 million consumers.
When doing business in Spain you can also be confident that you’re dealing with one of the most stable currencies in the world, the euro, so there’s less uncertainty when buying and selling goods and services. The euro is the official currency in 19 out of the 27 EU member countries.
Doing business in Spain can prove costly and time-consuming when paying overseas employees, investment partners and suppliers. Talk to Clear Currency about how to take the headache out of your international payments and mitigate currency risk when trading across borders.
Spain is the 14th largest economy in the world. After a nine-year period of recession following the financial crisis in 2007-2008, Spain’s economy significantly improved, partly due to a huge increase in exports. This period of growth continued up until the Covid pandemic in 2020, where GDP fell by over 11%.
By 2021, however, it grew by 5.1% and the OECD predicts that it will come in at, or above 4% growth for the full year of 2022. The expected foreign investment and billions in grants from the EU’s Recovery, Transformation and Resilience plan should ensure GDP continues to expand.
Good infrastructure and links to Latin America
Alongside it’s EU membership benefits Spain’s geographical location provides countless opportunities for growing businesses in other continents.
Spanish prime minister Pedro Sanchez recently described Spain as “Europe’s southern gateway” to Africa. Similarly, Spain’s economic presence in Latin America has strengthened in recent years despite its complicated history with the continent.
The World Economic Forum’s 2018 Global Competitiveness Report ranked Spain at 7th worldwide for its high quality infrastructure. Spain has the largest network of highways and motorways in the EU, as well as highly efficient railway systems and airport services.
UK businesses opening a branch in Spain will benefit from the tax system. When you expand your UK business into Spain, you’re only liable to pay tax in the UK, due to double taxation arrangements between the two countries. The UK-Spain treaty is designed to prevent individuals from paying tax twice on the same income. Individuals may have to pay tax in the UK and Spain if they are residents in the UK and have income or gains in Spain or if they are non-residents in the UK and have income or gains in the UK.
Opening a Spanish subsidiary - registration of a company or branch in the Spanish Commercial Register - allows businesses to avoid the limitations and restrictions caused by Brexit, and enable easier access to European and Spanish markets. Another huge benefit of trading in Spain is the access to multiple double taxation arrangements in central and South America and the EMEA.
Challenges of Doing Business in Spain
Operating in Spain is not without its risks. Here we explore some of the potential hurdles you could face when doing business in La Piel de Toro.
If you’re thinking about expanding your operations into Spain it’s important to be prepared for a fair amount of bureaucracy and red tape. In the most recent data from the World Bank, Spain ranks at 30 out of 190 economies in their ease of doing business report, and lags behind some of its European neighbours, including the UK, Norway, Sweden, Lithuania, and Germany. Enforcing commercial contracts (particularly complex ones) can sometimes prove difficult, and registering property and connecting electricity to business premises can be a slow process.
17 autonomous regions
It’s important to be aware that Spain is considered the most heavily developed country in Europe, divided into 17 autonomous regions.
This lack of cohesion between each regional government can add to the challenges of doing business in Spain and cause confusion and delays. Your regulatory and even tax obligations can vary - along with required financial information - depending on which part of Spain you’re doing business in, so it's important to do your research into the geographical area you’re looking to expand into.
If you’re a UK company planning to trade in Spain you’ll find things a little more complicated post-Brexit. At the end of December new tariff duties and compliance were put in place for UK citizens. If you want to do business in Spain, you’ll have to make sure you’re meeting international legal and trade obligations and that you’re up to speed on the tax system and new General Data Protection Regulation (GDPR) rules. Depending on the nature of your business you may have to deal with a whole new set of checks and licences, regulatory requirements and health and safety procedures. You may consider setting up a subsidiary company there in order to take advantage of EU benefits.
High levels of emigration
Other risks of doing business in Spain include a potential shortage of employees - depending on the nature of your industry - and employees with no long-term expectation of remaining in Spain. Spain has experienced a so-called ‘Brain Drain’ in recent years with high levels of emigration: 87,000 highly educated professionals left the country between 2009 and 2019.
Bribery and corruption
In less than three years Spain has dropped four places in the global ranking of the 2021 Corruption Perception index, and at the beginning of this year was ranked at 34th globally.
Public opinion surveys from recent years show that 94% of Spanish citizens are highly concerned about corruption. In recent years there have been many media reports of organised crime and high-profile corruption scandals. However, the Spanish government has taken measures to address this. For example, in autumn 2022 they approved a draft law to protect corruption against whistleblowers.
If you’re considering doing business in Spain you’ll need to be prepared for potential red tape and bureaucratic delays. Research into Spain’s different autonomous regions is essential. Depending on your business needs you may find a reduced pool of suitable staff and business contacts, due to high levels of Spanish emigration. However, Spain’s access to the EU single market, excellent transport links, potential tax advantages and options to expand into other continents are huge positives. The enduring business relationship between the two countries - combined with the Spanish positivity towards UK goods and services - makes doing business in Spain an attractive proposition for many UK companies.
Use Clear Currency when Doing Business in Spain
Whether you’re looking to pay Spanish business employees, purchase machinery or rent office space, we’ve got your money transfer requirements covered. As a currency specialist with a wealth of market knowledge and experience, Clear Currency can help your business to save on international payments to and from Spain. When you join us, you’ll be assigned a dedicated account manager who will cut through the jargon and provide a friendly, one-to-one service. You’ll also have access to our quick and easy online payments platform. Open a free account today for quick, secure and cost-effective international currency transfers.
How to Mitigate Foreign Exchange Risk
Currency risk can have a significant effect on the efficiency and profitability of any international business. Each exchange rate movement affects how much you receive from sales and what you pay to suppliers.
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